Exhibit 16A-3 Macro AD\AS Models in Panel (B)of Exhibit

Multiple Choice

Exhibit 16A-3 Macro AD\AS Models In Panel (b) of Exhibit 16A-3, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. Classical theory argues that:

A) SRAS will shift to leftward and establish full employment at P₃Y_p without government intervention.
B) higher wages will result in a leftward shift of SRAS.
C) long-run equilibrium will be established at Y and P₃.
D) all of these will take place.